State Bank of India Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, allowed both appeals filed by the assessee bank against the orders of the Commissioner of Income Tax (Appeals) for Assessment Year 2016-17. The dispute concerned whether the bank could be treated as an “assessee in default” under Section 201(1) of the Income-tax Act for failing to deduct tax at source under Section 192 on Leave Fare Concession (LFC) payments made to employees who undertook journeys involving a foreign leg.
The Assessing Officer had held that exemption under Section 10(5) was unavailable where travel involved a foreign component, relying on the Supreme Court’s judgment dated 04.11.2022. Consequently, the bank was treated as an assessee in default and demands under Sections 201(1) and 201(1A) were raised. The CIT(A) upheld this view, observing that Section 10(5) and Rule 2B permit exemption only for journeys undertaken within India and that the Supreme Court had conclusively settled the issue against the assessee on merits.
Before the Tribunal, the bank contended that during the relevant period it was bound by interim orders of the Madras High Court in pending writ proceedings challenging the bank’s circular relating to overseas travel under LFC. The High Court had clarified on 16.02.2015 that LFC payments would not amount to income for the purpose of deduction of tax at source and had further directed that, if the writ petition was ultimately dismissed, the employees themselves would be liable to pay tax. The bank argued that deducting tax contrary to those judicial directions would have amounted to disobedience of the High Court’s orders.
